Title insurance is considered a form of indemnity insurance. It acts as the protective approach for a property owner to be safe from any financial loss due to the defects or mistakes incurred in the title to the property.
It is a retrospective policy where the insured individual will be given protection for the losses that occur due to the events that occurred before the policy was signed.
IRDAI (Insurance Regulatory and Development Authority of India) introduced the Title Insurance scheme to protect home buyers from grievances if there’s a justified reason.
Just like you gain knowledge about the home loan interest rate charged by various financing companies, it is also important to learn and implement title insurance before your real estate transaction. So, let’s get a better understanding of title insurance and its importance in the Indian real estate industry.
The Idea of Introducing Title Insurance
Upon his/her real estate transaction, every buyer intends to own a clear or marketable property title without any restrictions or legal loopholes. If there are any specific local or state laws embedded in the property, then it might result in troubled ownership of the buyer. Even with proper assessments in real estate transactions, some anomalies are unavoidable.
Therefore, title insurance has now been introduced in India as well. Earlier, it was a common practice in countries such as the United Kingdom, Australia and Canada. But, RERA wants healthy transactions within the real estate sector of India, for which this inclusion was of utmost necessity.
Title insurance was introduced to offer credibility to all real estate promoters and property developers. All of the property developers are required to follow the specified rules by RERA to be able to build and sell properties in the market.
The role of insurance is to further facilitate residential housing properties. Homebuyers will be able to buy properties without worrying about the repercussions that title defects or improper sales agreements can cause in the long run.
This insurance is not just a preventive plan for the homeowners but also backs up the property developers with a strong reputation. Thus, the developers do not consider it an additional cost but an investment to reap better benefits in the future. RERA is taking strong measures to implement title insurance across India and make sure to bring in only the reputed and strong developers across the nation.
Importance of a Title Insurance
Title insurance is available for both home buyers as well as lenders. Lenders need to obtain title insurance from mortgagors to protect the security interest of the property, whereas home buyers need it for all-round protection of their investment.
The title insurance requires an in-depth title search associated with the property. Such a search will help minimise the potential liability of property owners by discovering any visible issues with the title.
Once the property owners complete all their procedures and take possession of their property, title insurance will act as a defence policy. It will protect the owner against any litigation which challenges the legality or validity of the new owner. Some of the advantages associated with owning a title insurance policy include the following:
- Crystallises the due diligence process
- Reduces the risk factor associated with the real estate transactions
- Supplements indemnities and representations that have been provided by the sellers within the documents.
- All defects within the title are covered under this insurance policy.
- All litigation costs are covered.
RERA is now mandating that developers obtain title insurance for their ongoing and new projects. It is the need of the hour, as the rate of property disputes is somehow persistent in the Indian market, and that needs to be controlled. RERA wants Indians to buy reliable properties only from reputed property developers, and this insurance is a leading step towards it.